Wed, Sep 12, 2012 - Page 13 News List

CAL’s prospects look cloudy: chairman

UNCERTAINTIES:The carrier has been reducing cargo capacity amid weak demand, while rising global crude oil prices are adding to cost pressures, Chang Chia-juch said

By Amy Su  /  Staff reporter

With global crude oil prices rising and cargo traffic looking weak, China Airlines Ltd (CAL, 中華航空) chairman Chang Chia-juch (張家祝) yesterday expressed uncertainty over the company’s business performance in the fourth quarter.

The nation’s largest airline said it expected that its plan to join SkyTeam Cargo — a global cargo alliance — in November would provide more opportunities for its cargo business.

However, “the trend in global crude oil prices will be a major uncertainty that influences the company’s profitability during the fourth quarter,” Chang told reporters on the sidelines of a company event to launch a university-industry cooperation project on aviation maintenance.

Although the airline might be back in the black in the third quarter, the recent rise in global crude oil prices has increased the cost pressures on CAL, Chang said.

Still, Chang said he expected global crude prices would have limited room to rise further in the near future, because the current upturn was mainly being driven by speculation — instead of a fundamental boost in demand.

The cargo business will be another major uncertainty for CAL’s sales in the fourth quarter, he said.

Last month, CAL’s cargo revenue remained low at NT$3.12 billion (US$105 million), down 8.77 percent from the previous month and 12.36 percent lower than a year earlier, company data showed.

“The company’s cargo business has been disappointing since last year,” he said.

Although the global cargo business should eventually rebound when demand recovers following inventory clearance, Chang said Taiwan’s aviation cargo sector might not benefit much given its industrial structure.

The nation’s airlines have to adjust their cargo business strategy by focusing more on the concept of hub operations, Chang said.

Given weak demand, CAL cut its cargo capacity further last month by taking a third cargo aircraft out of service, Chang said.

Two other cargo planes have been idled and placed in protective storage since late last year. The carrier still has 18 cargo planes in service.

While the cargo business has remained weak, passenger revenue remained healthy as the travel season peaked.

CAL posted NT$89.86 billion in revenue in the first eight months of the year, up 2.03 percent from the previous year, according to company data.

The airline posted a net loss of NT$1.04 billion, or a loss per share of NT$0.23, in the first half of the year. That compares with a loss of NT$661.5 million, or NT$0.17 per share, during the same period last year, data showed.

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